How to Improve Your Credit Score Before Buying a Home

Troy Meekhof

Why is Your Credit Score Important for Mortgages?

Lenders estimate your ability to pay back money borrowed based on your credit score. A high credit score can result in a lower interest rate and save you thousands of dollars in interest paid over the life of the loan.

At a glance, credit scores measure your credit profile health, making it a valuable tool for mortgage lenders. While there is more to your credit profile than your credit score, many loan programs consider both during the loan application process.


Which Credit Score is Used For a Home Purchase?

Your score will vary from industry to industry, because they all look at different factors to determine their risk. You will never have the same credit score for mortgage that you have for auto, insurance, or credit card companies. For mortgages, lenders (like Treadstone) prefer the FICO score. It tends to be the most accurate because it’s approved by Fannie Mae and Freddie Mac, two federally backed agencies who set standards for home loans.

FICO scores are calculated from many different pieces of credit data in your credit report. This data is grouped into five categories, each with different weights of how much they impact your score. Your FICO score considers both positive and negative information in your credit report.


Understanding the Components of Your Credit Score

Your credit score is comprised of five core elements, each of which are calculated by various aspects of your credit profile. When each component is measured and scored, it is conglomerated into one figure.

The largest factor in your credit score is payment history, which is around 35% of the weighting of your credit score calculation. Your payment history is scored by your track record of on-time payments on loans and lines of credit. Paying your bills on time will have the greatest impact on your score!

Around 30% of your score is based on the amount you owe, as a proportion of your total available credit. Low balances and high available credit will result in a positive score.

15%  is ranked by the age of your credit lines. Those with many years of credit history (regardless of payment history) will have higher credit score than those who recently opened their first credit card.

10%  is based on new lines of credit. Specifically, the number of inquiries you have collected in last previous 24 months. The fewer inquiries, the better!

The final 10% of your score weighting is determined by your mix of fixed debts, which are loans with static monthly and revolving debts, which are open lines of credit with variating payments and schedules. A mix of these debts are best!


FICO credit score breakdown


How Can I Improve My Score Before Buying a Home?

To raise your score and make your credit profile healthier, here are some tips to get mortgage-ready:


  • Do make all payments on time! As we’ve previously stated, your payment history is the largest factor in your credit score. One way to help ensure all don’t miss a payment is by setting up auto-pay on your accounts.
  • Use credit cards less! This is one of the easiest things to do when trying to buy a home. By using credit cards less, your credit utilization is decreased, which increases your credit profile’s health (and increases your score!)
  • File for a copy of your credit report. You can collect one free report from each of the credit bureaus per year, so look it over and correct any reported errors. If errors exist, work quickly with the reporting companies to resolve them. Need help? It may also be useful to work with your Loan Officer when deciding which errors to tackle first.
  • Ask for a higher credit limit on credit cards. By doing this, you may proportionally decrease the amount of available credit you are using, which makes your credit profile healthier. Before you start, try to find out if this will result in a hard inquiry against your credit. Remember: just because you have a higher limit, that doesn’t mean you should use it.


  • Don’t take out new lines of credit. New credit cards, auto loans, furniture financing, and more drastically affects your credit profile. This goes beyond your score, including qualification requirements like your debt-to-income (DTI) ratio.
  • Don’t max out your credit cards or other rotating debts. The less credit you use, as a proportion of your line of credit, the healthier your profile will be!
  • Don’t collect new hard inquiries. Excessive loan applications and credit pulls may “ding” your credit for up to two years, even if you are denied.
  • Try not to pay the minimum balance on revolving debts — instead, try to pay off as much as you can afford. As a result, this will decrease credit utilization and lower your monthly payments.

Even with all of these tips to raise your credit, we have one piece of advice: don’t obsess over your credit score! Treadstone is an amazing Michigan mortgage lender with plenty of tools for clients with a range of credit scores and situations.


Let’s talk!

At Treadstone, you’re more than your credit score. We’re here to work with you and your unique situation.

Do you have questions on how to get started or further improve your score when applying for a mortgage?


*Treadstone Funding and its employees are not financial advisors. Please contact a licensed financial advisor for specific advice.

A high credit score can result in a lower interest rate and save you thousands of dollars in interest paid over the life of the loan!